Netflix may build its own internal ad service

March 15, 2023

After the two-year Microsoft agreement expires, Netflix is likely to build its own advertising technology.

Netflix’s commercial-based subscription tier has only been around for about four months, but the streamer is already undergoing big changes in how it serves ads to consumers. The company is considering ditching its current partnership with Microsoft and building its own technology, the company reported. Digiday.

Under the current partnership with Netflix, which was announced in July 2022, four months before the tier’s launch, Microsoft’s technology will serve as the backbone of the streamer’s ads. The agreement between the companies is reportedly for two years. When that happens, Netflix will likely abandon the plan and adopt a new approach, according to Digiday.

Potential new approaches for streamers to support Best Western and Cadillac locations include building their own in-house advertising infrastructure. A streamer can buy Microsoft’s existing technology for ads to fully own it. Netflix executives are said to be discussing those two options, in addition to a possible renewal of the Microsoft contract, and former Comcast VP of Product Jon Whitticom has been involved in the deliberations as an adviser.

Netflix had no comment to IndieWire.

The news comes as Netflix maximizes profits from the ad tier, which was introduced after the tumultuous 2022 year to make a comeback as subscriber numbers plunged and the company’s stock price tumbled. Early estimates showed that Tier — a $6.99-a-month subscription with limited video quality that debuted with several titles unavailable on the service due to licensing issues — was off to a weak start, with just 9 percent of new signups and 0.2 percent in its first month. put out. overall number of subscribers, making it easily the least popular package for a streamer.

In February, Netflix reportedly told its ad partners that subscriptions had doubled in January compared to November, though it’s unclear what the actual number of subscribers is at the ad level. Netflix estimates the service will attract 1.75 million subscribers by the end of its first quarter of availability, roughly 2.4% of Netflix’s total North American subscriber base.

Netflix isn’t the only one that launched an ad tier last fall as recession fears grew. Disney+ launched a $7.99-a-month ad plan on Dec. 8, along with a price hike for the streamer’s regular ad-free plan.

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